A Legislative Summary Document Regarding

Department of Transportation
Contents Financial Profile Key Findings from Previous Audits and Reviews Performance Management Quality Assurance Team Reviews Disaster Preparedness Information System Vulnerability Assessments Travel Expenditures

State Auditor's Observations
The Department of Transportation’s (TxDOT) procedures for projecting revenues and expenditures are based on internal cash forecasts that are currently under review by the State Auditor’s Office. We expect to release our report in February 2003. As of the end of fiscal year 2001, TxDOT had not loaned $182.2 million of funds available in its State Infrastructure Bank (SIB) revolving loan fund. TxDOT does not know how much it spent to administer the SIB program. As a result, we could not determine whether the SIB program was self-sustaining. Overall, TxDOT has successfully implemented a procurement card program that achieves its objectives of eliminating the need for petty cash and reducing paperwork for emergency purchases.

Prepared for the 78th Legislature by the State Auditor’s Office
January 2003 SAO No. 03-368

This is not an audit report and, with the exception of any audit report summaries, the material in this document has not been subjected to all of the tests and confirmations performed in an audit.

964. the State Highway Fund (Fund 006) balance was $4.902. this occurred primarily because of increased expenditures on transportation projects.446 505. According to management. vehicle registration fees.590 561. The State Auditor’s Office is currently reviewing TxDOT’s cash forecasts. which include revenue and expenditure projections. At that time.975.527 127.1 million.427 230.299 Appropriation Year 2002 $3. Expenditures by Comptroller USAS Category Groups Comptroller USAS Category Group Highway Construction and Maintenance Salaries and Wages a Appropriation Year 2000 $3.181 240. and 2002. We noted that TxDOT’s “Estimated Revenue Collections Supporting Schedule” for Fund 006 in the 2002–2003 Legislative Appropriation Request (LAR) contained significant estimated negative beginning unencumbered balances for 2000 through 2003.386 167.249 140.631.910. the lowest daily balance was $373 million. We obtained explanations from TxDOT for fluctuations across years that appeared unusual. while deductions are presented on an appropriation basis. TxDOT reconciles USAS to the Automated Budget and Evaluation System of Texas (ABEST) each quarter. Since then. the cash balance has grown.406. which resulted in more construction being accomplished and payments being higher than expected.891 145.810 147.013. TxDOT temporarily suspended work on some construction and maintenance contracts until the spring of 2002 for projects that had been recently awarded but on which work had not yet begun.075 Appropriation Year 2001 $3. It is provided for informational purposes to show how TxDOT has spent its funds.037. as required.400.315.006. Other factors included fewer rainy days than expected.627 237. The report is expected to be released in February 2003.213. TxDOT bases expenditure projections on historical trends.802 293. Expenditures by Category The table below shows TxDOT’s expenditures by Comptroller of Public Accounts category as reported by TxDOT in USAS for appropriation years 2000. 03-368 . this occurred because revenues in the schedule are presented on a cash basis. 2001. This data has not been audited.055 284.683 178.048.131. In addition.614.618. and in November 2002.941 126. According to TxDOT personnel.698.938. which was below TxDOT’s targeted minimum daily balance of $75 million. Reconciliations to USAS and ABEST TxDOT’s reconciliations of its internal accounting system to the Uniform Statewide Accounting System (USAS) appear to be made in a timely manner and properly reviewed. and interest on Fund 006 deposits—based on recent collection trends for the particular source.110 Professional Services and Fees Repairs and Maintenance Supplies and Materials Other Expenditures (Note A) Employee Benefits January 2003 -2- SAO No.868.Department of Transportation SAO Contact: Sandra Vice (512) 936-9500 Financial Profile Fund 006 Lowest Daily Balances In October 2001.409 180. estimates of cash required for current and future construction and maintenance contracts. and other information such as economic trends and changes in legislation.073.024.828 526.169 254.686. Revenue Projections TxDOT separately projects revenues from various sources—such as motor fuel tax.157 258.616.452.

and metropolitan transportation planning. This category also includes expenditures related to public transportation.657. Note C – The increase in Public Assistance Payments in appropriation year 2001 reflects federal funding that was utilized in this category for the Congestion Mitigation and Air Quality and Surface Transportation Planning programs.563 Appropriation Year 2002 111.269 $4.930.573.243.880. a subdivision of the State that is separate from TxDOT.359.945 208.949 8. Note B – The continued increase in Intergovernmental Payments is a result of increased funding to cities for the support and promotion of general aviation.853 70.584 13.574 The amounts shown here for Salaries and Wages will not agree with the Salary Expenditures in the Workforce Summary Document prepared by the State Classification Office (SCO) because the USAS Salaries and Wages category does not include certain object codes that SCO considers employee compensation.447.692 31.580. and non-appropriated as of November 30.393. The loans will be repaid from funds realized from the initial bond funding.787.390 21.570 8.033 $4.957 1.962 46. This was accomplished in part by purchasing only the most critical capital goods until the cash balance was increased to a desirable level. 2001–December 31.061 376.171.568. This increase corresponds to increased funding provided in TxDOT’s appropriations. 03-368 . January 2003 -3- SAO No.432 69.078 14.Department of Transportation SAO Contact: Sandra Vice (512) 936-9500 Expenditures by Comptroller USAS Category Groups Comptroller USAS Category Group Intergovernmental Payments (Note B) Interfund Transfers/Other Public Assistance Payments (Note C) Communications and Utilities Rentals and Leases Printing and Reproduction Travel Claims and Judgments Capital Outlay (Note D) Interest/Prompt Payment Penalties Total Expenditures a Appropriation Year 2000 97.305.557.766 31.946.377 35. 2002. Source: USAS – All funds including appropriated.050.164 69.635. Note A – The increase in appropriation year 2002 is for advances to local municipalities to provide funding for development expenses for the North Texas Turnpike Authority. unappropriated.760 171. traffic safety.536 8.296.386.875 Appropriation Year 2001 105.554. Note D –The decrease in this category for appropriation year 2002 results from TxDOT’s efforts to increase the cash balance.218.283 68.424 6.487. These include performance awards and employee recognition awards.663 6.550.050 71.313 1.420 29.625.052. 2002 The State Auditor’s Office will release a report in early 2003 on the financial transactions in the State Highway Fund (Fund 006) at the Department of Transportation (TxDOT).028.163.773 2.794 31.436.817 $5. Key Findings from Previous Audits and Reviews Ongoing Financial Review of the State Highway Fund (Fund 006) January 1.372.053.068 16.

the rules in the Texas Administrative Code. We tested a sample of division and district purchases and. funds remain unused in bank accounts outside of the State Treasury. If not spent. July 2002) As of the end of fiscal year 2001. we determined that state agencies and TxDOT sufficient time to address institutions of higher education (state entities) do not appear to need all the recommendations in this recently released travel advance and petty cash funds they have set aside. 2002 No status is reported at this time to allow TxDOT sufficient time to address recommendations in this recently released report. 02-059. Status of Audit Recommendations as of November 30. TxDOT approved an additional loan for $144. On May 30. 02-022. Status of Audit Recommendations as of The Fort Worth District Office of the Department of Transportation (TxDOT) maintains a $1. all the questionable items we identified had already been identified and addressed by TxDOT staff. 2002 The five state agencies we audited spent and accurately reported their travel advance and petty cash funds in accordance with state laws and regulations. In addition. This SIB loan only enabled the North Texas Tollway Authority to pay TxDOT for the outstanding balance of a 1995 loan from TxDOT’s Fund 6. An Audit Report on Revolving Loan Funds (Report No.7 million to the North Texas Tollway Authority.Department of Transportation SAO Contact: Sandra Vice (512) 936-9500 An Audit Report on State Entity Management of Travel Advance and Petty Cash Funds (Report No. 2002 (unaudited) TxDOT has reported the following: Implemented Total recommendations 2 2 SAO No. the Department of Transportation (TxDOT) had not loaned $182. January 2003 -4- Status of Audit Recommendations as of November 30. we identified inconsistencies related to the SIB program.2 million of funds available in its State Infrastructure Bank (SIB) revolving loan fund. No status is reported at this time to allow However. No new roads will be built as a result of this loan. Also. we could not determine whether TxDOT’s SIB program was self-sustaining. after our fieldwork ended. February 2002) Overall. 03-368 . TxDOT’s SIB tracking system is not programmed to make adjustments when borrowers make early payments or must be assessed penalties for late payments. through our analysis.500 petty cash fund balance that had an average monthly activity of only $224 over an eight-month period for fiscal year 2002. An Audit Report on Procurement Card Processes and Controls (Report No. As a result. the SIB tracking system currently allows all designated users the same level of access. August 2002) November 30. 2002. We also identified control weaknesses related to travel advance and petty cash accounts at the agencies we audited. except for several split purchases. TxDOT does not know how much it spent to administer the SIB program. Although we found no violations of applicable laws. and TxDOT’s internal policies and procedures. the Texas Department of Transportation (TxDOT) has successfully implemented a procurement card program that achieves its objectives of eliminating the need for petty cash and reducing paperwork for emergency purchases. This indicates that the Fort Worth District Office did not review fund activity to determine its current needs. these report. These included inconsistencies among the terms of the loan agreement. 02-070. the procedures for the SIB program should be formalized.

471. external factors. 03-368 . Connecting You to the World by John W. The questioned cost was $33. pertinent information related to the individual measure. . please see www. but it limits its risk by giving most cardholders a small transaction limit. TxDOT provides cards to about 15 percent of its staff.sao.Department of Transportation SAO Contact: Sandra Vice (512) 936-9500 TxDOT relies on preauthorization for procurement card purchases as well as management review of monthly reports that show where cardholders shopped and the amount spent for each procurement card transaction.cfm?report=2002/02-345. The program did not comply with its cash management funding technique in relation to draws for construction expenditures in August 2001. TxDOT develops targets for performance measures based on historical information (trend analyses). For the full text of the KPMG audit report. letting volume. 2001. Performance Management Performance Indicators Used by Management The Department of Transportation (TxDOT) uses the measures in the General Appropriations Act to monitor performance. Estimating Performance Targets TxDOT’s methods of determining performance targets appear to be appropriate. 20011 (February 2002) Cash Management For the fiscal year ended August 31.00. To complement the key performance measures included in the General Appropriations Act. Status of Audit Recommendations as of November 30. the Department of Transportation’s (TxDOT) Highway Planning and Construction – cluster program clearance pattern was calculated to be 4.state. 2002 KPMG LLP will report on the status of these recommendations in the federal portion of the statewide single audit for fiscal year 2002.05 days. 1 Results from only the most recent statewide single audit are included in this Legislative Summary Document.us/Reports/report. Johnson. It did not comply because amounts were drawn by the program from the federal government two to four days prior to the day the program expected to pay out the related funds. TxDOT has established additional internal goals. Texas Transportation Commission. This report is expected to be released in Spring 2003. January 2003 -5- SAO No. and funding levels. KPMG LLP conducted the federal portion of that audit under contract with the State Auditor’s Office. Only excerpts from the KPMG audit report are presented above. Chairman. .tx. These internal goals are identified in the August 2001 report Texas Transportation Partnerships . State of Texas Federal Portion of the Statewide Single Audit Report for the Year Ended August 31.

03-368 . Completed Projects Quality Assurance Team Annual Report – January 2002 TxDOT completed the following projects at the total costs noted: Direct Access Storage Device Upgrade: $8. and the initial completion date was August 31. Actual performance cannot be determined because of inadequate controls and insufficient documentation.31(d)(2)]. and controls appear adequate to ensure accurate collection and reporting of performance data.224.715. Reported performance is not within +/-5 percent of actual performance. The initial budget was $10. 2001. but the controls over data collection and reporting are not adequate to ensure the continued accuracy of performance data. Article IX. a Category Certified Certified with Qualification Factors Prevent Certification Inaccurate Not Applicable Definition Reported performance is accurate within +/–5 percent. A justifiable reason exists for not reporting performance. Quality Assurance Team Reviews Completed Projects Conducted by the Legislative Budget Board and State Auditor’s Office Quality Assurance Team Annual Report – January 2003 The Department of Transportation (TxDOT) completed the TxDOT Enterprise Resource Management System (TERMS I) project at a cost of $5.885.1.1.755. or there is an error rate of at least 5 percent in the supporting documentation.190 Enterprise Systems Management: $2.1 A.1. Period 2001 2001 2001 2001 A A.316 on August 31. 03-008. Sec.Department of Transportation SAO Contact: Sandra Vice (512) 936-9500 Most Recent Performance Measure Certification Fiscal Year 1998–Fiscal Year 2003 The results included in An Audit Report on Fiscal Year 2001 Performance Measures at 14 Entities (Report No.563 January 2003 -6- SAO No.5 A. 6.11 Goal/Strategy Transportation Services and Systems Plan/Design/Manage Routine Maintenance Vehicle Dealer Regulation Measure Percent of Motor Vehicle Consumer Complaints Resolved Number of Highway Construction Projects Contracted Number of Lane Miles Resurfaced With Overlays Average Number of Weeks for Complaint Resolution Total Measures Certified Without Qualification a Certification Results Certified with Qualification Certified with Qualification Certified with Qualification Inaccurate 0/4 (0%) Data Reliability Percentage (Certified and Certified with Qualification) 3/4 (75%) The percentage of unqualified certifications is presented because it is used in determining an entity’s eligibility for performance rewards as established in the General Appropriations Act [77th Legislature. 2001. Reported performance is within +/-5 percent. November 2002) for this entity are summarized below.981.

therefore. The project vendor was terminated.990. which affected the time line. Joint Application Development sessions.202.390 $5. add Internet capabilities Report traffic data Deploy PeopleSoft™ Initial Budget $4.491.159 $10.133. Current expenditures for this project are $6.720 $4.914. TxDOT began to update and integrate existing automated processes of the Motor Vehicle Division.856.942 $19. In the event of a disaster. and planning tasks. 03-368 .Department of Transportation SAO Contact: Sandra Vice (512) 936-9500 Right-of-Way Information System: $4.798. The cost decrease is based on using previous elements from other systems.098 Current Budget $4. The cost increase and time line change are due to a new vendor.352. the evaluation of the replacement of the Uniform Statewide Payroll System (USPS) with PeopleSoft™ Payroll. Our objective was only to provide the information reported by TxDOT. This alternative setup would provide network connectivity to all locations.495 Texas Historical Sites Atlas: $1. TxDOT indicates that it tests the plan annually and validates with three or four districts or divisions.120 $18. to a remote disaster recovery site within 72 hours.500. Current expenditures for this project are $1. analyze. Statewide Traffic Analysis and Reporting System (STARS) — In August 1999. and report various traffic data.184 Budget Change $0 ($2.942 $17. January 2003 -7SAO No. TxDOT began work on a vehicle application system for point-of-sale sticker printing. and the implementation of the Internet version of PeopleSoft™ Human Resource Management System (HRMS). TxDOT Enterprise Resource Management System (TERMS II) — This project began in September 2001 and involves the deployment of PeopleSoft™ to users.000 $12.731. Motor Vehicle Information System (MVIS) — In September 2001. Standard audit criteria for disaster preparedness have not been established.556.056. TxDOT started this project to redesign the point-of-sale portion of the Registration and Title System and to provide Internet capabilities for the registration of vehicles.159 $6.866.552.191. TxDOT says it would be able to restore data. TxDOT is revising its Central Data Center plan.425 Ongoing Projects Quality Assurance Team Annual Report – January 2003 Licensing Administration Certification and Enforcement (LACE) — In November 1999.480.086 Initial End Date 08/31/03 08/31/03 08/31/03 09/30/99 08/31/03 Current End Date 06/30/04 08/31/03 03/31/03 12/31/05 08/31/04 Time Change 10 months None (5 months) 75 months 12 months Disaster Preparedness We gathered information from the Department of Transportation (TxDOT) on plans in place to provide continued operations and services in the event of a disaster. which is stored offsite daily. Registration and Titling System (RTS–formerly RACER) — In September 2000. TxDOT began working on this system to collect.255.000 $4.670 $642. Current expenditures for this project are $312.880) $6.386. The cost increased based on additional contractor costs for risk assessment.226. we are not evaluating TxDOT’s plans. Project LACE MVIS RTS STARS TERMS II Function Update and integrate processes Point-of-sale sticker printing Redesign point-of-sale.059.226.377. TxDOT’s Information Services Division has a Disaster Recovery Plan for its Central Data Center. Current expenditures for this project are $1. and management plans for the revision to be part of an overall business continuity effort.135.612. Current expenditures for this project are $10.

Source: Uniform Statewide Accounting System (USAS) as of November 30. The SAO’s Legislative Summary Document titled “Information System Vulnerability Assessments” provides general information about the results of information system vulnerability assessments.466 439.386.313 7.372. Amounts are subject to change as agencies continue to record additional expenditures or adjustments.822 $ 6.654 1. 03-368 .335 $ 0 Caps apply to total travel in appropriation years 2000 and 2001.776) $ 6.966 550.205.469 (21. January 2003 -8- SAO No.102.506 642. Detailed results of this work are confidential under Texas Government Code.805 823 14.571. Travel Expenditures Travel Expenditures by Appropriation Year (unaudited) 2000 In-State Travel Out-of-State Travel Foreign Travel Other Travel Costs Total Travel Expenditures Limit on Travel Expenditures (Cap) Expenditures in Excess of Cap a 2001 $ 5.Department of Transportation SAO Contact: Sandra Vice (512) 936-9500 Information System Vulnerability Assessments The State Auditor’s Office (SAO) and/or the Department of Information Resources performed one or more information system vulnerability assessments at the Department of Transportation between January 2000 and November 2002.773 552.872 $ 6.335 $ 0 $ 2002 $ 5.123 a 0 $ 5.957 7.205. but caps apply only to out-of-state travel and foreign travel in appropriation year 2002.714.435 0 18. have been adjusted for any increases requested by TxDOT and approved by the Legislative Budget Board in accordance with the General Appropriations Act.928. Caps. 2002.077(c). calculated by the Comptroller of Public Accounts. Section 2054.

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